Is AABB Stock a Good Investment?

One small company that has caught the eye of some investors is Asia Broadband (OTC:AABB). Despite a name that seems to imply telecommunications activity, Asia Broadband is a mining stock.

 

The company engages in the production of metals, mostly for supply to the Asian market. AABB is engaged in both precious and non-precious metal production.

 

The company’s most prominent business move of late, however, has been an attempt to create a gold-backed cryptocurrency token. The token is known as AABBG and, according to Asia Broadband, was backed by $30 million in gold holdings at the time of its release in 2021.

 

In the future, the company plans to create its own cryptocurrency exchange where users can buy and sell AABBG tokens in exchange for other major cryptocurrencies.

Although it doesn’t list on any major US exchange, you can buy AABB stock through any brokerage that sells over-the-counter shares.

 

Keep in mind that some brokerages don’t sell OTC stocks, so you’ll need to check with your broker to find out if you can buy AABB stock through your existing account.

As of the time of this writing, there are no analyst ratings for AABB stock. Regrettably, this means that earnings forecasts and price targets for AABB are not available.

 

There are some non-analyst projections for the stock that show it increasing from its current price of $0.10 to a possible maximum high of over $0.80 by 2025.

 

With a stock priced this low, however, high levels of volatility are to be expected. As a result, it’s usually a good idea to take long-term price projections with a grain of salt.

 

AABB shows a number of red flags in terms of risk. The largest of these is its obviously low share price. At just $0.10 per share and trading only over-the-counter, Asia Broadband falls firmly into the penny stock category. These stocks are famously risky. Although some do eventually list on a major exchange and become established securities, reports claim as many as 99 percent of penny stocks eventually fail.

 

The number of outstanding shares in AABB could be a problem, as the company’s value may be too diluted. The total number of shares in the company currently stands at more than 1.9 billion. While this number of shares is far from unusual among larger companies, it seems excessively high for such a small-cap firm.

 

With so many shares available, it’s likely that the price of each share will remain quite low unless the company produces truly exceptional growth.

 

Profitability is also a serious problem for Asia Broadband. The company’s return on assets currently stands at -167.80 percent. Even more alarming is its return on equity, which is currently -1,362.08 percent. Given these numbers, it appears that AABB is nowhere close to turning a profit anytime in the near future.

 

Another warning sign can be found in the company’s earnings per share. The most recent reported EPS was a loss of $0.093 per share. For most stocks, this kind of loss would be within an acceptable range. Keep in mind, however, that AABB only trades for $0.10 per share. In other words, Asia Broadband is losing more than 90 percent of its current value per share.

 

Finally, investors should be concerned about the company’s shift in focus toward cryptocurrency tokens. Although the cryptocurrency market is booming at the moment, most experts believe there will be a shakeout at some point. When that occurs, more obscure currencies and tokens will likely suffer, even if larger names like Bitcoin aren’t as badly affected.

 

It’s worth noting that the gold backing for the AABBG token could put a drag on the company. AABB has dedicated at least $30 million in physical gold reserves to supporting the token. Unless the speculative token project bears fruit, AABB will be locking up a comparatively large amount of its total inventory that could otherwise be sold in more traditional precious metals markets.

 

Despite its obvious problems, Asia Broadband does seem to be a legitimate company engaged in the mining business. AABB was incorporated in 1996 and appears to have real mining interests centered predominantly in Mexico.

 

In late 2021, the company finalized a deal to acquire the Bonanza gold mine in Nayarit, Mexico for a total of $6 million. The deal took the form of $2 million in cash and $4 million in stock. Assays for the mine showed high-grade gold was present at the site. While never explicitly stated, this acquisition was likely related to the company’s plans for its gold-based tokens.

 

Clearly, the company’s ability to fund this kind of acquisition shows that it is legitimate. Being legitimate and being successful, however, are two entirely different matters. The risk factors detailed above remain very relevant, even though the company itself is doing real business in its chosen industry.

 

At best, AABB stock is a speculative and highly risky investment. While stocks that trade at such a low price can produce disproportionate gains when they rise, they can also result in total losses. Keeping in mind the failure rate of companies that issue such low-priced stocks, it’s difficult to make a case for AABB as a good investment.

 

For all but the most aggressively risk-tolerant investors, AABB stock is far too much of a gamble to be worth including in a portfolio. Even if you are comfortable with extremely high levels of risk, Asia Broadband’s financials and seeming lack of prospects for near-term improvement likely make it a poor choice.

 

The company’s sudden venture into the cryptocurrency market is also a cause for concern. While there certainly is some merit to the idea of a gold-backed crypto token, the odds are that Asia Broadband’s move into this market won’t pay off long-term. If the token fails to catch on, AABB could be left sitting on tens of millions of dollars in gold that could otherwise be sold on the open market.

 

With all of this said, there’s always the chance that AABB stock could be one of the few penny stocks to break into the mainstream markets. If that were to occur, investors who buy today would reap large profits. As with other stocks that trade in this range, though, the odds of the company failing outweigh the probability that it will eventually list on a major exchange or break the $1 per share price mark.

 

Ultimately, there are better investments than AABB out there. For more conservative investors, this stock is far too uncertain and carries too many risks. For risk-tolerant investors who don’t mind speculating, there are likely superior options in the small-cap market. Although time could change Asia Broadband’s fortunes in the stock market, the stock is not an appealing investment at the moment.

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